EMMOTT V MICHAEL WILSON & PARTNERS LTD

[2009] EWHC 1 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Teare, 12 January 2009

Arbitration – Peremptory order – Whether arbitrators possessed jurisdiction over dispute – Whetherr arbitrators entitled to make peremptory order – Principles to be applied for enforcement of peremptory order – Freezing order by court to support arbitration – Arbitration Act 1996, sections 41, 42, 44 and 67

By an agreement made in 2001 the applicant joined the defendant law firm, MWP, and was granted a 35 per cent profit-sharing interest. The 2001 agreement contained an arbitration clause for the reference of all disputes to arbitration. The applicant alleged that in 2005 the parties had agreed that the applicant would be entitled to a 27 per cent interest in shares in a company, Steppe Cement, those shares having been granted in place of legal fees for work carried out by MWP before and after the applicant had joined. Following a dispute between the parties MWP commenced arbitration in London. The applicant counterclaimed for his proportion of the Steppe shares. On 26 September 2008 the arbitrators issued directions requiring MWP to procure that a 27 per cent shareholding in the Steppe shares were to be held by the bank in which they were lodged to the order of the Chairman of the Arbitral Panel. The directions were made after the arbitrators had reviewed evidence which satisfied them that in the absence of directions there was a “real suspicion” that the shares might be put beyond the applicant’s reach in the event of him being successful in the arbitration. The direction was not, however, complied with, and after further directions were issued the arbitrators ultimately, on 27 November 2008, issued a peremptory order under section 41 of the Arbitration Act 1996. That order was not complied with, and the applicant sought an order from the court under section 42 enforcing the peremptory order. Enforcement was granted. (1) The counterclaim in respect of the 2005 agreement was within the scope of the arbitration clause, so the arbitrators had jurisdiction to make orders in respect of that agreement and the challenge to the order on jurisdictional grounds under section 67 of the 1996 Act would be dismissed. (2) The peremptory order was validly made under section 41, as it enforced directions lawfully given under section 38 as regards the preservation of property. The peremptory order would be enforced under section 42, on the basis that the court would not review the arbitrators’ decision to make a peremptory order and would enforce the order unless there were special reasons for doing so, eg, the arbitrators had failed to act fairly or impartially, they had exceeded their powers or there had been a material change of circumstances after the making of the peremptory order. (3) A freezing order would be made under section 44 as there was a risk that MWP would put the shares beyond the applicant’s reach.